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Are Uber and Lyft Shutting Down Its Operations in California?

In September 2019, California Governor Gavin Newson signed new law, the Assembly Bill 5 otherwise known as (AB5) or “gig worker bill” which went into effect on January 1, 2020. The law requires all employers to reclassify their workers as employees unless they fall under the ABC Test, which would classify them as independent contractors rather than employees.

For a worker to be classified as an independent contractor, all three standards must apply:

  1. The employee is not under the employer’s control.
  2. The employee’s work performed is separate from the employer’s essential business.
  3. The employee performs the same type of work in an independent business.

Independent contractors under California Law are classified as non-employees; therefore, they are exempt from receiving labor protection from their employers such as minimum wage, sick leave, overtime, meal and rest breaks, and worker’s compensation.

Uber and Lyft, popularized ride sharing companies, recently came under fire after being sued by the state of California for failing to comply with the AB5 Law. On August 10, 2020, the Court of Appeal ruled that within ten (10) days, both companies were required to reclassify their drivers as non-exempt employees. Before the ruling was upheld, however, the Court ruled on August 20, 2020 to allow Uber and Lyft operations an extension of stay, granting the ride sharing businesses temporarily until October 2020 to operate as usual without having to change their business models. The ruling came shortly after Uber and Lyft CEO threatened to fully shut down operations if a stay order was not issued. Furthermore, the companies are pouring contributions to propose a statewide ballot into the November 3, 2020 US National elections which would allow voters to decide whether the Uber and Lyft workers will have to be reclassified as employees.

Responding affirmatively on California Proposition 22 ( App-Based Drivers as Contractors and Labor Policies Initiative (2020)) would allow app-based drivers to be classified as independent contractors, therefore, exempting employers from providing benefits otherwise afforded to non-exempt employees. Among other things, the ballot proposes that employers, who do not set working hours for their workers, prohibit workers from other employment opportunities or require acceptance for rides, should not have to classify their workers as employees. Instead, the bill proposes the addition of vehicle insurance and some healthcare coverage for qualified workers who average at least fifteen (15) or more hours per work week.

The question remains to be answered whether Californians will continue enjoying the easily accessible rides after November 3, 2020.

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